Michelin Reports 16.4 billion euros Sales, 35.5% Drop in Net Result

Michelin’s full-year net sales totalled 16.4 billion euros in 2006, up 5.1 per cent following a 3.6 per cent increase in 2005. According to the company, Michelin’s price mix effect remained favourable (+4.7 per cent of sales). This, together with internal cost reductions enabled the group to offset most of the 800 million euros burden caused by increased raw material prices in 2005. However, the manufacturer’s net result was down 35.5 per cent to 573 million euros, reflecting large non-recurring restructuring and industrial plant closure charges. Operating income totalled 1.118 billion euros, down 29 per cent.

Meanwhile, it has emerged that Michel Rollier is to propose that Michelin’s corporate governance rules are amended and that the management be reinforced by the appointment of two Managing Partners to work alongside him.

Commenting on the year’s results, managing partner Michel Rollier noted: “In 2006, for the fourth year in a row, Michelin had to cope with continued external cost inflation: raw materials, energy and logistics in particular. The group’s pricing policy made it possible to preserve a high level of operating income, a level that we intend to raise further in the future. To this end, it is more necessary than ever to bring the group’s entire cost structure down and to push sales volume growth through increasingly competitive product offerings.

“In 2007, markets are globally expected to grow while external costs should show more favourable trends than in the past: Michelin’s net sales and operating margin should therefore post a tangible increase compared to 2006, in line with the objectives the Group has set for 2010.”

New managing partners

Michel Rollier, Managing General Partner (Gérant Associé Commandité) of CGEM, with the approval of the Supervisory Board, will ask the Shareholders at their next General Meeting on 11 May 2007 to vote on changes to the Company’s governance rules. He would like the Management Team to be extended to include Managing Partners (Gérants non commandités) to ensure better collegiality of the Management and its long-term stability.

Didier Miraton, head of Research and Industrial Performance, and Jean-Dominique Senard, head of Finance, both of whom are actually members of the Group Executive Board, will be proposed as new Managing Partners (Gérants non commandités).

Most of Didier Miraton’s career, after joining Michelin in 1982, has been in research and innovation. Jean-Dominique Senard has had management extensive experience in major international groups and joined Michelin two years ago.

The new Managing Partners (Gérants non commandités) will form, together with the Managing General Partner (Gérant associé commmandité), the Management of the Company, with the Managing General Partner, Michel Rollier, having the principal management role.